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Everything I See Says "No Double-Dip" In Near Future


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Unless someone sees a wildcard, there has been nothing to indicate that we are going to see a double-dip. 


Check out retail sales today and the number of consecutive months inventory has been stockpiled.  You will get a slow-down at some point, but I see no double-dip in the U.S. or Canada.  Buffett was right!  Cheers!







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Mr. B,


All that tells me, is that the recession was a very large one that probably has corrected spending to where it should have been, based on the historical drop in interest rates and over-consumption through the late 90's and new millenium. 


The trend over the last 18-20 months clearly shows that the economy has rebounded.  It's nowhere near where it was, but based on the leverage used at that time, the levels are probably more appropriate presently. 


Statistics can always be skewed for any argument.  My argument is that in the last year and a half, things have been improving, and continue to do so...although painstakingly slow in some areas.  Cheers!

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Guest misterstockwell

  My argument is that in the last year and a half, things have been improving, and continue to do so...although painstakingly slow in some areas.  Cheers!


Employment improved? Not hardly

Home prices? No

Housing inventory including foreclosures? Up

Consumer debt? Barely improved

Planned Layoffs? Up dramatically

Growth in GDP? estimates rapidly shrinking

Small Business confidence? Depressed

What does Bernanke think?

Bernanke says the U.S. economy is growing more slowly than the Federal Reserve expected and the biggest factor depressing consumer confidence is poor job growth.

I will stick with ECRI's view

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Guest misterstockwell

or this:


"Meanwhile, consumer sentiment unexpectedly dipped in early October, falling to 57.5 from 59.4 in the final September report, according to the Thomson Reuters/University of Michigan survey. Economists expected the reading to rise to 60.2.


And U.S. import prices unexpectedly gained 0.3 percent in September, logging their largest increase in five months amid higher fuel and food costs, according to the Labor Department. Economists polled by Reuters had expected prices to decline 0.3 percent last month. "

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"U.S. Economy Tipping into Recession


Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there’s nothing that policy makers can do to head it off.


ECRI’s recession call isn’t based on just one or two leading indexes, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, which was the first to turn down – before the Arab Spring and Japanese earthquake – to be followed by downturns in the Weekly Leading Index and other shorter-leading indexes. In fact, the most reliable forward-looking indicators are now collectively behaving as they did on the cusp of full-blown recessions, not “soft landings.”


Last year, amid the double-dip hysteria, we definitively ruled out an imminent recession based on leading indexes that began to turn up before QE2 was announced. Today, the key is that cyclical weakness is spreading widely from economic indicator to indicator in a telltale recessionary fashion.


Why should ECRI’s recession call be heeded? Perhaps because, as The Economist has noted, we’ve correctly called three recessions without any false alarms in-between. In contrast, most of those who’ve accurately predicted a recession or two have also been guilty of crying wolf – in 2010, 2005, 2003, 1998, 1995, or 1987.


A new recession isn’t simply a statistical event. It’s a vicious cycle that, once started, must run its course. Under certain circumstances, a drop in sales, for instance, lowers production, which results in declining employment and income, which in turn weakens sales further, all the while spreading like wildfire from industry to industry, region to region, and indicator to indicator. That’s what a recession is all about.


But how can we have a new recession just a couple of years after the last one officially ended? Isn’t this too short for an economic expansion?


More than three years ago, before the Lehman debacle, we were already warning of a longstanding pattern of slowing growth: at least since the 1970s, the pace of U.S. growth – especially in GDP and jobs – has been stair-stepping down in successive economic expansions. We expected this pattern to persist in the new economic expansion after the recession ended, and it certainly did. We also pointed out – months before the recession ended – that because the “Great Moderation” of business cycles (from about 1985 to 2007) was now history, the resulting combination of higher cyclical volatility and lower trend growth would virtually dictate an era of more frequent recessions.


So it comes as no surprise to us that, with the latest expansion only a couple of years old, we’re already facing a new recession. Actually, such short expansions are hardly unheard of. From 1799 to 1929, nearly 90% of U.S. expansions lasted three years or less, as did two of the three expansions between 1970 and 1981. In other words, such short expansions are unusual only with respect to recent decades.


It’s important to understand that recession doesn’t mean a bad economy – we’ve had that for years now. It means an economy that keeps worsening, because it’s locked into a vicious cycle. It means that the jobless rate, already above 9%, will go much higher, and the federal budget deficit, already above a trillion dollars, will soar.


Here’s what ECRI’s recession call really says: if you think this is a bad economy, you haven’t seen anything yet. And that has profound implications for both Main Street and Wall Street."



At the very least, things will be interesting!



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So, what really is a recession..?  ???


I know about the theory and NBER data, but I believe the one that makes most sense to me is the one the Buffett once stated in an interview.. (cant remember which one).. He said in some sort that as long as the people are poorer today than yesterday -- we still are in a recession..



In a CNBC interview 30/9-11, andrew asks WB if the US is going into another recession and Buffett's reply:

Oh, we're not.  We're not going— I think it's very, very unlikely we'll go back into a recession.  We're coming out of a recession and what we've been doing it since 2009, and a great majority of our businesses are going to be earning more money than they did last year and the year before.



Below represents Real GDP per Capita in the United States:

2007-01-01  48532

2008-01-01  47923

2009-01-01  45854

2010-01-01  46844

2011-E        48067


So, in my opinion, USA will not be going back into a recession simply because we are still coming out of it..  ::)




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I saw that article this morning and it is a good one in the context of this discussion. If you use the painting on a canvas analogy then I suppose the economy can at best be the background music to which we listen to while we paint.


If your research indicates a high enough probability that the CEO's words will ring true 3-5 years from now and  the current valuation for Cummins offers good value then personally I would invest.


I find CYD particularly interesting in this regard. PE of 3.7 v Cummins' 13 with most exposure to China and since it is the largest manufacturer of diesel engines in China one is exposed to construction and infrastructure spending which forms the largest block of GDP.

In that vein and in terms of background music the following,


http://www.bloomberg.com/news/2011-10-13/china-sept-passenger-car-sales-rise-8-8-to-1-32-million-units.html (focus on truck sales)



It think a hard landing is priced in at CYD and the only thing to worry about is opportunity cost.


So, at the end of the day it all boils down to how much bad news is priced in.


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Guest misterstockwell

I wouldn't touch something like Cummins with a 10 foot pole. My point is that I don't think investors are pricing in a recession at all. As Parsad says, he see no double dip in the near future. I see a great deal of evidence that a recession is coming. Differing views--that's what makes a market!

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I just don't see global leverage allowing anything more than flat real growth for at least a decade or more in the developed world. I am extremely worried about a double dip and things even worse, because I just see too many signs of it. The China property situation is very worrying. If you buy into the story of a China property/infrastructure bubble and the nexus between it Europe/Japan/Aus then how can the following not scare you?


"In my sixteen years as a developer, this is by far the most challenging year I've ever had, in terms of what we could sell," Zhang, chief executive of Beijing-based SOHO, recently told reporters.



However, for investment purposes I don't feel comfortable making a call on that, so I like the approach to invest only when the bad news is priced in. Effectively, I then don't have to make a call on the economy. To invert; I certainly will not invest in a situation where I'm dependent on the economy to turn around in order for me to make a good return.


Anyway, just another approach out there.

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Guest misterstockwell

Empire State



By Gene Balas


| Oct 17, 2011


| 9:23 AM EDT



The Empire State Manufacturing Survey indicates that conditions for New York manufacturers “continued to deteriorate” in October, as the New York Fed put it. The general business conditions index remained negative and, at -8.5, was little changed. Readings below zero indicate contraction, so even if the measure stabilizes at the same negative reading, it’s still showing contraction, just at the same rate.’


The new orders index hovered around zero, indicating that orders were flat.  This measure had been negative in every month after May, indicating that after contracting, new orders for this month had stabilized at a lower level, but one month does not a trend make.  Meanwhile, the shipments index rose above zero to 5.3.  The inventories index stayed below zero, a sign that inventories declined, which may reflect expectations for lower future orders.


The indexes for both prices paid and prices received fell, but remained positive, suggesting that price increases moderated. These measures had posted rather notable declines in recent months, which tend to indicate that input costs and selling prices for finished goods are both showing less inflationary pressure. The index for number of employees rose several points but was at a relatively low level of 3.4, while the average workweek index was negative for a fifth consecutive month. So, even though payrolls are flat, workers may be working fewer hours, though, of course, different companies may hire at the same time others cut hours.


Importantly, the future general business conditions index dropped six points to 6.7, its lowest level since early 2009, and as recently as May, this reading was over 50. The future new orders component was still positive, at 12.36, but down sharply from readings near 60 at the start of the year. Future indexes for prices paid and prices received declined.  This suggests lower growth and lower inflation expectations going forward. Recall that the last time the future conditions reading was this low was when we were in recession, even though it is still a positive reading.


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Very nominal increases other than for Capital One.  You have to look at the underlying credit quality of the borrowers.  If you don't see significant increases at American Express on one end of the spectrum, and you see nominal increase at Bank of America, I would guess that the spike at Capital One is solely based on the credit quality of their borrowers.  Cheers!

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